How eBay has become the biggest e-commerce website in the world

Did you know that eBay started because the founder, Pierre Omidyar had a fascination with Pez dispensers? For those not familiar, Pez is a type of small, hard candy which people like to eat and which comes in little containers which have various cartoon characters on the top. In fact, a Pez dispenser was famously used as a prop for a Seinfeld episode where Jerry was obsessing over the fact they are hard to load.

Whatever the case may be, Omidyar was trying to find a way to trade with other collectors of Pez dispensers and he set up a simple web site in order to find like minded people. Once he had the site going though, he realized that he didn't need to limit himself to Pez dispensers or to feeding his personal habit. He could open the whole eBay site to the world and allow other people to trade whatever it was they happened to be looking for.

Omidyar has said in interviews that he never expected it would become anything more than a small niche site, but the idea caught on. In essence, what he had done was to create a way for people to have a virtual garage sale, offering to others treasures that they themselves considered junk. The business grew by leaps and bounds and became a marketplace for the world. However, with the growth came a few problems: fraud, a bad reputation and the limits of offering to sell people's assorted castaways.

eBay attacked all three problems head on. From an early stage, eBay had offered limited insurance liability against fraud, guaranteed by Lloyds of London, one of the largest insurers in the world. However, there was a limit of $250 for the protection and it also had a deductible of $25. That meant that while much of the eBay world was covered, if you bought a $30 item which never arrived, you could expect, after a lengthy review process, to recover just $5. Buy a $1,000 item which didn't arrive or proved to be a knockoff and you would be out $775. In addition, people needed a better way to pay for things. PayPal had been offering their services for a few years, but eBay was still pushing their own system, which wasn't as robust.

All that changed when eBay purchased PayPal. Now, they promote the PayPal brand as a way for people to make their purchases on eBay and PayPal has in turn expanded and become a behemoth in the world of online marketplaces all on it's own. At the same time, eBay created the preferred seller program, which allowed some sellers who made large sales numbers to stand out and even to be invited to eBay sponsored conferences to learn more about how to be a professional eBay seller. In short, eBay moved on from its' roots of being a garage sale online to being a marketplace where small businesses could reach a global audience.

Today, eBay is the world's largest online marketplace with annual sales in the range of around $3 billion dollars and with no signs of slowing down. Not too bad for someone with a Pez dispenser fantasy, huh?